Fund spotlight: Guinness Asian Equity Income review 2021

An interactive investor analyst offers a view on one of our Super 60 trust picks.

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Guinness Asian Equity Income fund aims to provide investors with exposure to high-quality, dividend-paying companies based in the Asia Pacific region. Since its launch in 2013, the strategy has been run by Edmund Harriss, who has more than 25 years’ experience in the sector and is supported by co-manager Mark Hammonds.

By focusing on the individual company fundamentals rather than the broader macro picture, the managers try to identify high-quality companies that have recently fallen out of favour, but have previously demonstrated the ability to navigate through the full economic cycle.

Stock selection is based on three key characteristics: quality, value and dividends. The process focuses on profitable businesses that have generated sustainable and high returns. In addition, companies whose shares trade below their fair value and businesses that can sustainably grow their dividends in the future are potential candidates for inclusion.

The managers believe that strong cash generation and distribution of dividends also provides a degree of downside protection.

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What does it invest in?

The fund is run on a high-conviction basis of 36 equally weighted stocks and pays little attention to a specific benchmark or market index. In terms of market cap, the managers would consider companies with a minimum market capitalisation of $500 million and generally aim for a lower portfolio turnover rate. The process also adopts a strict one-in, one-out investment policy, which provides a good balance between the benefits of lower correlation, while allowing each company to potentially add value through reasonable performance.

Currently, the fund has around a third of its assets invested in China, 21% in Taiwan and 11% in Australia. From a sector perspective, the portfolio has 24% exposure to financials, 22% in information technology and 21% in consumer discretionary. Some of the holdings include companies such as Singapore's first and largest industrial Real Estate Investment Trust – Ascendas (SGX:A17U), Australian retailer JB Hi Fi (ASX:JBH) and the multinational Taiwan Semiconductor (NYSE:TSM).

What makes it special?

The fund operates in a rather specialist area of the market, as Asia Pacific is not the typical hunting ground for income investors. Its unique approach of investing in a concentrated portfolio, while having no constrains at a sector or geography level provides investors with quality income generated though a number of diversified channels.

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It should also be highlighted that the fund managed to generate positive return of around 5% in 2020, despite the extremely unfavourable market environment, while at the same time keeping its dividend yield above the market average at over 3.5%.

Performance

• Click here for more information on this fund, including price, yield and charges

 Source: Morningstar as at 18 February 2021. Total return in GBP.

What sort of investors will it particularly suit?

The Guinness Asian Equity Income Fund features in the ii Super 60 rated list as an Asian equity income option. Run by an experienced management team, it offers exposure to high-quality dividend‐paying companies in the Asia Pacific region. The fund has produced consistent total returns since inception and its yield may look attractive for investors with stricter income requirements. However, its high portfolio concentration makes the strategy a higher-risk one, so it may be best utilised as a satellite holding within a well-diversified portfolio.